The real cause of America’s budget crisis

by vent wing

There is a devastating reality hidden within the debate over the latest budget battle and the annual threat to shut down of the federal government: unless Washington changes its entire concept of what the federal government is supposed to do, there is no conceivable way the budget can be realistically balanced, and there is no way an eventual collapse of the American dollar—and your personal finances– can be avoided.

The only way Washington can restore fiscal sanity to government, and economic growth for Americans, is to stop using your tax dollars as a personal campaign piggy bank for the re-election of the president and members of the Senate and House.

For far too long, the traditional duties of government have been given short shrift in favor of programs that persuade grateful constituents to vote incumbents back into office.

In the past, when there were a greater percentage of blue-collar jobs, elected officials could win support by bringing or maintaining programs such defense, aerospace, or even highway development in their states. That wasn’t all that bad, because efforts to protect the nation, provide for its future prosperity, and keep national infrastructure intact are valid roles for the federal government that produce provable results. Additionally, even the most ambitious programs of that variety could only spend so much. Some programs, such as farm supports, were expensive, but also limited in how much they could cost.

But the economy changed, and those occupations became less a keystone of the national employment picture Elected officials needed to find something else to persuade voter loyalty. With advances in campaign targeting, particularly in presidential elections, it was possible to devise specific entitlement programs aimed at winning ballot box support. Unlike the logical limits on even the biggest ticket items in areas such as defense, the potential cost of these entitlement programs was limitless, and they returned nothing to the national economy while draining dollars away from the private sector where they could have produced jobs.

This approach has given a massive advantage to Democrats. The Republican rank and file traditionally supported spending on programs such as defense and tax breaks, but opposed most (but not all) “entitlement” funding. The election and re-election of Barack Obama, with his broad promises of massive new entitlements, has been the highpoint of this approach.

The fact that big-ticket social spending programs don’t actually solve national problems (remember the war on poverty?) is beside the point. Targeted appropriately, they do get incumbents re-elected, and that was, after all, the goal in the first place.

As the dire fiscal implications became evident, (the national debt is fast approaching $17 trillion dollars and the 2013 budget deficit is clocking in at over $800 billion) the Republican Party failed to capitalize on the enthusiasm of the Tea Party that could have produced a political counterbalance to the vote-getting appeal of entitlements.

Rather than accept the reality that massive entitlement spending is bankrupting the economy and change course, Washington continues to mask the problem. The Federal Reserve’s printing of more and more currency ($85 billion per month, 6% of GDP annually; since 2007, the money supply has been increased by a factor of 4X!) and spend that additional currency on bonds to artificially hold down interest rates is a stop-gap measure that will eventually lead to extraordinary problems.

What the President and his allies have done in response to this crisis is to take exactly the wrong approach, advocating for higher taxes, (although they have been open to reducing the corporate tax that has placed American companies at a world wide disadvantage.)

The approach is incorrect because the United States does not have a revenue problem at all. In the past 11 months, Washington collected $2,472,542,000,000—a record high. Nevertheless, the federal government still incurred a $755 billion deficit. Giving more money to this administration is the same as giving more booze to an alcoholic: it won’t cure the problem and it will eventually kill the recipient.